Nifty options make slow start on SGX

Options contracts on the 50-stock Nifty index of the National Stock Exchange (NSE) have made a slow start on the Singapore Exchange (SGX).

In the first few sessions since their launch on July 16, the daily average volume in Nifty options contracts has been about 6,000 contracts, data compiled by BS Research Bureau show. Average daily turnover in these contracts has been about Rs 310 crore.

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SGX, which already offers trading in Nifty futures since September 2000, has roped in BNP Paribas, Optiver Australia, Susquehanna International Group and Timber Hill as market makers to provide liquidity from the start of trading of Nifty options on its platform.

Nifty futures traded on SGX are very popular among a section of overseas investors due to reasons like longer trading hours, lower transaction costs and relative anonymity. SGX accounts for about 25 per cent of Nifty futures trading globally. In terms of open interest (OI), SGX Nifty futures hold 55 per cent of the aggregate OI of the Nifty on NSE and SGX.

In the first six months of 2012, SGX Nifty futures traded 7.4 million contracts, averaging daily volume of 59,358 contracts. OI stood at 240,317 contracts by June-end.

Experts believe Nifty options are unlikely to cross Nifty futures volume on SGX in the near term.

“SGX Nifty derivatives have been historically used for positional trades by foreign institutional investors (FIIs) rather than day trading. Domestically, index option turnover is high, as there are large number of high-frequency trades (HFTs).

A lot more diversified category of investors, domestically, provides good opportunities for HFTs," said Yogesh Radke, head of quantitative research at Edelweiss. “It’s unlikely that Nifty options volume will surpass Nifty futures volume on SGX. It may cross in open interest terms but not in volume terms."

In India, Nifty options are the most actively traded derivatives contracts and comprise a major chunk of the total turnover of the derivatives segment on the NSE. Average daily turnover in Nifty options has been about Rs 85,044 crore this year so far, which is 70 per cent of the total average daily turnover in the derivatives segment on the NSE, data compiled by BS Research Bureau showed.

BIRTH PANGS Nifty F & O on SGX

Options

Futures

Volume In Contract

traded Value* Rs crore

Volume In contract

traded Value Rs crore

Jul 16, ‘12

4,380

252.41

23,543

13,55.17

17-Jul

7,124

419.27

21,163

1,211.71

18-Jul

6,653

388.34

29,702

1,721.99

19-Jul

5,924

344.4

24,886

1,445.91

20-Jul

10,790

631.10

27,016

1,559.30

23-Jul

5,864

348.15

92,743

5,302.26

24-Jul

4,281

254.75

273,334

15,707.65

25-Jul

3,185

187.29

172,168

9,880.70

26-Jul

1,431

84.38

55,564

3,111.16

27-Jul

3,313

188.38

67,894

3,858.04

* Notional value data; Compiled by BS Research Source: Bloomberg

Average daily turnover in Nifty futures has been about Rs 9,500 crore in 2012 so far, making up nearly eight per cent of the total average daily turnover in the derivatives segment of India’s largest stock exchange.